In the Markets Now: Labor Day Labor Market Update
A Few Noteworthy Labor Market Indicators
Every year, we like to take Labor Day as an opportunity to look at some key indicators in the all-important U.S. job market.
Weekly hours worked (esp. in manufacturing) is a classic leading indicator, predicated on the idea that businesses will first adjust employee hours in response to demand shifts before taking the bigger step of hiring or firing staff. Manufacturing hours have now been rising for years and currently sit at their highest level since 2019. Surveys and other activity gauges bear this out – despite plenty of well-known headwinds, new orders and production are rising.
The LMSI is a unique economic gauge because it measures the breadth of labor market health by aggregating higher frequency data from each of the 50 states. Given this view, it has historically tracked recessions well by identifying when labor market stress becomes widespread rather than isolated in one area (e.g., Tech layoffs in California). Today, the measure implies far less stress than some headline data might suggest and that overall recession risk remains low.
An aging populace and weak immigration mean fewer new workers are entering the labor force than in the past. As labor force growth slows, the economy needs fewer new jobs to keep unemployment steady, reducing the break-even pace of job growth. This colors how we view the monthly jobs report: if the labor force is barely growing (or even shrinking), monthly payroll numbers that would have been dreadful in the past – even as few as zero jobs added – may still be sufficient to keep unemployment stable.
Still, some softness in payrolls is likely due to tech uncertainty. Youth unemployment remains low overall, but early-career hiring in fields exposed to AI disruption (e.g., software) has been weak. The positive news is students are adapting – per Goldman Sachs, enrollment is already falling in at-risk majors, while rising in more resilient fields (e.g., healthcare, engineering). Technological transitions are never frictionless, but younger workers are typically more flexible in reorienting skills towards areas of demand.
Disclosures
This is not a complete analysis of every material fact regarding any company, industry or security. The opinions expressed here reflect our judgment at this date and are subject to change. The information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy. Market and economic statistics, unless otherwise cited, are from data provider FactSet.
This report does not provide recipients with information or advice that is sufficient on which to base an investment decision. This report does not take into account the specific investment objectives, financial situation, or need of any particular client and may not be suitable for all types of investors. Recipients should not consider the contents of this report as a single factor in making an investment decision. Additional fundamental and other analyses would be required to make an investment decision about any individual security identified in this report.
For investment advice specific to your situation, or for additional information, please contact your Baird Financial Advisor and/or your tax or legal advisor.
Past performance is not indicative of future results and diversification does not ensure a profit or protect against loss. All investments carry some level of risk, including loss of principal. An investment cannot be made directly in an index.
Copyright 2026 Robert W. Baird & Co. Incorporated.
Other Disclosures
UK disclosure requirements for the purpose of distributing this research into the UK and other countries for which Robert W. Baird Limited holds an ISD passport.
This report is for distribution into the United Kingdom only to persons who fall within Article 19 or Article 49(2) of the Financial Services and Markets Act 2000 (financial promotion) order 2001 being persons who are investment professionals and may not be distributed to private clients. Issued in the United Kingdom by Robert W. Baird Limited, which has an office at Finsbury Circus House, 15 Finsbury Circus, London EC2M 7EB, and is a company authorized and regulated by the Financial Conduct Authority. For the purposes of the Financial Conduct Authority requirements, this investment research report is classified as objective.
Robert W. Baird Limited ("RWBL") is exempt from the requirement to hold an Australian financial services license. RWBL is regulated by the Financial Conduct Authority ("FCA") under UK laws and those laws may differ from Australian laws. This document has been prepared in accordance with FCA requirements and not Australian laws.
